Crude oil fell to a five-month low, dropping for the third week in four, as a pledge yesterday by OPEC to cut output may have little effect on world supply.
Prices alternately rose and fell during the session because of a second decision by OPEC, to raise output quotas. Production reached a 1 1/2-year high last month as members replaced Iraqi oil that was cut off by war, according to Bloomberg estimates. The output cuts and new quotas won't take effect until June 1.
"The market was reacting to the fact that there are more questions than answers for supply and demand, thanks to OPEC's confusing message," said Michael Busby, manager of crude oil and refined products trading at Northville Industries in Melville, New York a gasoline importer.
Crude oil for June delivery fell US$0.38, or 1.4 percent, to US$26.26 a barrel on the New York Mercantile Exchange, the lowest closing price since Nov. 25. Prices rose as high as $27.05 and fell as low as US$26 in today's session. The June contract dropped 8 percent this week.
Traders who follow charts and graphs sold contracts after prices fell below US$26.40, a mid-March low, said Tom Bentz, an oil broker at BNP Paribas in New York. "Prices traded over US$27 a barrel, but the upside ran out of steam."
In London, the June Brent crude-oil futures contract fell US$0.24, or 1 percent, to US$24.09 a barrel on the International Petroleum Exchange. Prices were down 6.9 percent this week.
OPEC raised its daily production quota by 900,000 barrels to 25.4 million barrels, reflecting the March output rise.
Iraq, whose oil reserves are second only to Saudi Arabia's, was OPEC's third-biggest producer in February, pumping about 3 percent of world supply, according to Bloomberg estimates.
Iranian oil minister Bijan Namdar Zanganeh said today that OPEC will pump close to 26 million barrels a day in April and May.
"We will produce close to our March output, but without Iraq," he said.
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